Category: Policy development

Recognising the role that housing plays in supporting sustainable communities and economic growth, and given the complex interplay of factors required to address the challenges of housing development, Highlands and Islands Enterprise commissioned research has recently been finalised.The full report is available from the HIE website at www.hie.co.uk/housingresearch2017

The study was undertaken by Ipsos MORI in partnership with Anna Evans and Mandy Littlewood of the Indigo House Group, both specialists in housing policy, strategy and analysis. Key findings include:

Across all tenures, there were 1,627 completions across the Highlands and Islands in 2016 – 187 fewer than the estimated 1,814 new properties required. While private sector provision has fallen from a high of 2,490 units in 2007 to 1,130 in 2016, the current level of provision is more than the market demand of 742 identified across Housing Need and Demand Assessment estimates. However, these new housing supply is largely clustered in more accessible areas close to urban areas, with far less development in fragile areas. Affordability of private sector housing is also a considerable issue, particularly in Highland and Moray.

The number of affordable housing completions are well below what is required (just 46% of the estimated 1,071 affordable properties required), with significant gaps in some areas including Shetland, Na h-Eileanan an Iar and Moray. Financial constraints and viability issues are a key consideration for the deliverability of SHIPs, particularly in fragile areas.

There is considerable pressure in many areas where young people are more commonly stuck and unable to form households, facing higher average house prices with lower average incomes. These are commonly fragile areas or tourist destinations with very high numbers of second homes, creating tension between supporting the tourism sector and providing affordable accommodation for young people and families wishing to live and work in the region. In many areas, business development and expansion is also adversely affected by the lack of affordable accommodation for workers.

Current Housing Need and Demand Assessment methods are not fine-grained enough to provide insights below the Housing Market Area level, therefore obscuring the needs of smaller, fragile communities. Targets tend to be based on estimates of past trends and what can be achieved given constraints, rather than what is needed or aspirations.

Public housing policy is currently focused on increasing affordable housing supply, with the Scottish Government committing a record level of resources. However, the scale of the gap between housing need, demand and supply indicates the need for even more, or different positive action and intervention across tenures. While the Rural Housing and Islands Funds, the Self-build Loan Fund and Croft House Grant scheme are directed towards smaller rural and remote communities, policy and new interventions around infrastructure appear to be better suited to urban areas.

A number of overlapping barriers, constraints and opportunities were identified through the research as follows:

Access to land (that is ‘effective’ and can be built on without considerable risk);

Infrastructure costs and barriers and the burden of regulation through planning permission and building regulations, with conservation issues being a ‘special case’;

Organisational disconnects and friction;

Limited building capacity;

Innovations – in building methods and approaches and funding.

Supply of credible, effective land is in short and decreasing supply, and the risks and costs to enable viable development (such as infrastructure requirements, planning costs, building and road construction regulatory burdens and upfront capital payment for utilities) are often too great without intervention, especially in more rural and remote environments. There is rigid application of regulations with little flexibility, and these constraints, exacerbated by lack of economies of scale means the risks are often too great for private developers to supply in rural and remote areas.

In many fragile areas, community initiative and leadership is often the catalyst for new housing supply. This has been supported in many communities by enabling third sector organisations. However, the processes can be complex and time consuming, and the resource of communities and enabling organisations are spread very thinly. Further investment in these types of activities and simplification of application processes will be critical in encouraging community-led development in fragile areas.

Intervention needs strategic oversight of housing development. The Highland Housing Hub is one exemplar model of this, showing what can be achieved with very intense collaborative working.

The public sector finance context means that there is currently little scope to allow ‘speculation’ in the public sector to drive private sector investment. This means that ‘riskier’ innovations may need additional resource or special policy provisions if the gap between housing demand, need and supply is to be met.

12,000 younger Scots face up to £8.6m rent shortfall from LHA cap, new report from the Indigo House Group confirms

A new report by the Indigo House Group shows that around 12,000 mainstream social tenants across Scotland aged under 35 could collectively face an annual rent affordability gap of between £5.3 million and £8.6 million when a UK Government cap on housing benefit (or the housing element of Universal Credit) for social housing tenants at Local Housing Allowance (LHA) rates comes into force in April 2019. This is a key finding of new research commissioned by the Chartered Institute of Housing in Scotland in partnership with the Scottish Government and published today (11th October 2017). The research was conducted by the Indigo House Group.

The cities of Edinburgh and Glasgow are likely to be the most severely affected by the policy with 27% of all of Scotland’s single Housing Benefit claimants aged under 35 living in these two cities, equivalent to more than 6,500 people. The total weekly shortfall in Edinburgh is expected to be £19,600 and in Glasgow, those affected face a collective weekly shortfall of £18,800.

Analysis of average social sector rents shows the potential financial impact for individuals varies considerably depending on the size of home they are living in and how social rents compare with LHA rates for the area. Across Scotland, single tenants under the age of 35 living in a one bedroom home and affected by the cap will face an average shortfall in rent of £6.60 per week. The highest shortfall for one bedroom homes will be experienced in Edinburgh at £22.09 per week. Meanwhile, there are eight areas showing no shortfalls between the average local one bedroom social rents and the ‘cap’ LHA rate.

Since October 2015, the UK Government has made various proposals and amendments to cap Housing Benefit or the housing element of Universal Credit for social housing tenants at LHA rates, including for those living in supported or temporary accommodation. The proposals are intended to bring payments for social housing tenants in line with those living in the private rented sector. Legislation to implement these proposals has yet to be introduced. However, as the proposals currently stand, single people under 35 years of age will see their allowance capped at the Shared Accommodation Rate (SAR).

An upper estimate of the impact of the policy suggests that around 14,400 tenants could face a collective shortfall of £8.6 million annually. These figures were arrived at by calculating the difference between average rents by property size submitted annually to the Scottish Housing Regulator by individual social landlords, comparing this with the SAR in the corresponding local authority area and multiplying this by the estimated total number of social tenants aged under 35 living in that area.

An alternative method using Department for Work and Pensions (DWP) figures was also used. By excluding an estimated 2,500 Housing Benefit claimants aged under 35 who are thought to live in temporary or supported accommodation and may therefore benefit from a partial or total exemption from the proposed LHA cap, the research estimates that the LHA cap would still hit around 12,000 social tenants living in mainstream accommodation with a collective rent shortfall of £5.3 million per year.

Over and above these changes in mainstream housing, there will be massive impacts in temporary and supported accommodation with the total rent gap of £28.6m between current and LHA capped rents. Although it is anticipated that some tenants living in specialist and temporary accommodation will be protected from the cap, it is not yet clear what exemptions will be made or how much funding will be available to plug this gap.

The Indigo House team is delighted to have advised the Scottish Federation of Housing Associations (SFHA) in its Rent Setting and Affordability Guide. The Guide has been a joint enterprise between Mandy Littlewood, Anna Evans and Andrea Paterson of Indigo House, with SFHA colleagues. The Guide was launched on 21st June, when Mandy and Anna presented to guide to a full house of SFHA members, and other interested landlords.

The Guide has been designed to be a practical tool to help housing associations and co-operatives make practical decisions on all aspects of rent policy, rent structures, rent setting and affordability in a way that embraces good value for money principles for both the landlord and their tenants. It can be used by governing body members; senior members of staff; and all staff involved in the rent setting process.

The Rent Setting Guide is structured around the rent setting process, to take readers through this step-by-step. It includes a rent-setting checklist and activities to allow members to test their organisations. The Guide also provides useful information to help readers understand the current legislation and economic context to rent setting in Scotland and the wider UK.

The Guide also provides members with an affordability tool, which is the culmination of the analysis and consultation work that Mandy did for SFHA on Rethinking Affordability. The affordability tool provides housing associations and co-operatives across Scotland with a simple way of comparing their rents for different sizes of property with moderate incomes for different household types.

The Rent Setting Guide also provides the reader with an update on current thinking around Value for Money (VFM) across the sector. The significant challenges facing social landlords in Scotland is likely to mean that we have to get better at measuring and at forecasting. We need to be more innovative in how we assess value and we need to get better at articulating what results we are getting with tenants and sometimes taxpayer’s money. VFM will help us to do that.

A new report on the potential impact of leaving the European Union on Scottish housing associations and co-operatives has found that 80% of respondents foresee a possible negative impact.

The key areas of concern highlighted in the report, The Potential Impact of Brexit on Housing Associations in Scotland, released by the Scottish Federation of Housing Associations (SFHA), are the ongoing uncertainty; impact of uncertainty on financial markets and impact on private finance; and the possible impact on construction and workforce supply chain and costs.

However, the report also found some organisations are more pragmatic and see some balance between the risks and opportunities of Brexit.

SFHA members prioritised their key areas of concern as follows:

Capacity of the construction industry to deliver new social housing developments

Financial investments via European funds for social housing

Equally weighted were: workforce capacity for service delivery and private sector investment in social housing

Potential changes in regulation and procurement

Demand for social housing and future developments

Nearly 70% of respondents think Brexit will decrease the capacity of the construction workforce to deliver on new social housing developments and over 80% believe it will impact on the supply chain of trade and building materials through increasing costs in general – inflation and exchange rates – and in building materials and components in particular.

However, some members said they thought opportunities could arise from leaving the EU regarding developing a greater supply of Scottish and British construction trades and workforce.

While the majority of respondents said they have not experienced any change in attitude from potential private finance providers or investors since the referendum, there are examples of uncertainty and concerns in future growth and development plans due to current discussions with lenders.

Mary Taylor, Chief Executive of the SFHA, said:

“The capacity of the construction industry to deliver new social housing is paramount at a time when 50,000 affordable homes are to be delivered within five years. It is therefore a huge concern that almost 70% of respondents to our survey think Brexit will decrease capacity of the construction workforce.

“While there is little optimism about the challenges ahead, there is a recognition that it may prompt better training and employability opportunities. However, to exploit those effectively, and minimise disruption, we need to start acting now. I have already written to Scottish Ministers to encourage them to create a significant number of apprenticeships in order to safeguard the future of the housebuilding sector in Scotland.

“Access to funding and investment is also an area of huge concern for the social housing sector, and we will be seeking clarity on the situation as negotiations progress.”